SCOTT WELSH TRADING BLOG

My Favorite Thing

My Favorite Thing

Mar. 17, 2021

I’m hopeless.

No matter how many years I’ve been trading or how many hundreds of hours I’ve tested, one thing has never changed.

I love hearing about new trading systems.

The other day I was watching a webinar from a friend of mine, and it might as well have been 2004. I was excited about a new trading system all over again.

And that’s really the reason I write this Newsletter.

I would love a place to go every week to hear about trading systems. So, every week, I try to offer that to you.

In these emails, I’ve tried to write about all sorts of systems using all sorts of instruments.

But now that I’ve finished the Master Trend robot (it seemed like it took forever), there’s a little extra potential bonus.

Traders who have that robot will get trading ideas in the Newsletter that can be immediately testable. For me, that’s heaven. Hopefully, it’s also something you’re interested in.

Of course, you don’t have to have my robot to test out Newsletter ideas. You test them manually or on your specific platform.

The goal is that one of my strategies sparks an idea that allows you to beat the market. Having the robot might make the process faster.

To that end, this week we’re looking at a new strategy–this time on a Daily chart.

Typically, strategies on Daily charts don’t produce as much profit as methods used on lower timeframes.

So why do them?

The reason to consider Daily systems is that the likelihood of future success is higher.

In general, Daily signals are more powerful and more robust than quicker signals.

Sure, the Daily backtest results might not look as good. But the tradeoff is that a Daily backtest might produce a realistic snapshot of what might happen years down the road.

That’s the theory anyway.

Here’s the system (using the Master Trend robot):

Daily Bollinger Band™ Breakout

  • Long Target: 425 pips
  • Short Target: 325 pips
  • Time exit Long: 18 days
  • Time exit Short: 178 days
  • BB Length: 20 (default)
  • BB Standard Deviation: 1.4

Here’s the Performance Report trading 1 lot on GBPJPY from 2003-2021:

Looking at the results, they look okay: $104,000 of profit with a $20k drawdown. If we used a hypothetical $20,000 account, those tested returns would beat the market with far less drawdown

If we compounded, we would hypothetically outperform the market by a wide margin.

But, of course, there would be losing years using a system with these principles. There would also be years with hypothetical returns near the 100% level (depending on what account size we chose).

All of that makes this system worth consideration, but it’s not as much profit as we’ve seen on lower timeframe systems.

Would the potential robustness of a Daily strategy outweigh the higher backtest performance on a different strategy?

That’s the question.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.